Florian M. Kern

Zoltan Pozsar is one of the world’s most respected money market specialists and predicted the repo crisis in September 2019. Here he is getting it wrong, as he misses key aspects about the gold market and MoPo implementation in his analysis (1/18)🧵

@schieritz 🇩🇪 stagniert trotz Außenüberschuss von 4% — weil die Binnennachfrage schwach ist. Statt zu diskutieren, wie wir Konsum und Investitionen erhöhen und den Kuchen größer machen, sprechen wir darüber, wie wir einen kleineren Kuchen aufteilen (höhere Steuern vs niedrigere Ausgaben)

es gibt keine Austerität im makro-ökonomischen Sinn (wegen der Sonderhaushalte) aber natürlich wird jetzt über Kürzungen verhandelt, die die Leute ganz konkret treffen.

Wie aus dem Ziel besonders sparsam zu sein eine ganz besonders teure Wohnungspolitik wurde 👇von @selschulte @maxkrahe wirtschaftsdienst.eu/inhalt/jahr/20…

1/9 Brilliant article by Martin Wolf on global imbalances. Wolf is one of the few economists who have an intuitive sense of the global economy as an economic system, which means he is also one of the few who understands how global imbalances work. ft.com/content/72ab51…

Germany's reluctance to invest in productive infrastructure isn't a sign of thriftiness, nor does it help Germany keep its debt burden low. If the investment is productive – i.e. if it creates more economic value than it costs in economic resources – then almost by definition the investment will cause GDP to rise by more than the debt rises, and German's associated debt burden will actually decline. The point is that if German infrastructure is in bad enough shape to have become a constraint on productivity growth – and almost everyone agrees that it is – then borrowing to fund infrastructure investment will not only accelerate productivity growth, it will also reduce the debt burden by creating more than enough additional real income to service the additional debt. Granted that it is difficult for a large economy to change institutions and growth models, including fear of debt, that have been in place for decades, but sclerosis isn't strategy, and as East Asian economies fight to continue increasing their share of global manufacturing, while the US works to reverse the decline in its own manufacturing share, it is precisely countries like Germany, for whom manufacturing currently represents a much larger share of the economy than in the rest of Europe, that will pay the highest cost for doing nothing. wsj.com/world/europe/g…

Want to understand how market discipline in EU bank liabilities works in practice? This thread is for you 👇

@jeuasommenulle @threadreaderapp unroll

16) Bottom line: CMDI is a real regulatory achievement, 27 hierarchies becoming one. The cost: SP is now unambiguously mezz, derivatives remain unclear & banks that "optimized" MREL with deposits have until 2029 to issue more SP/SNP

1) You might have missed it but the EU just published the CMDI package – one of the most consequential pieces of bank regulation. It fixes something that has been really embarrassing about European banking regulation for more than a decade. And the impacts are huge.

BoE zu Leistungsbilanzungleichgewichten: "IMF scenario analysis suggests that a well-designed combination of policy adjustments across the US, the euro area and China could raise global GDP while bringing current account gaps...closer to warranted levels" bankofengland.co.uk/bank-insights/…

** Reducing the Fed's balance sheet ** Ten days ago, I was part of a discussion at @BrookingsInst on how to shrink the Fed's balance sheet with Darrell Duffie and @WenxinDu. I tried to lay out the discussion in terms that, hopefully, clarify it to a broader set of economists. Here are the main points: 🧵

Stattdessen: mehr Energiesubventionen, teure ungezielte Maßnahmen, vermutlich eine Umsatzsteuererhöhung (dezernatzukunft.org/droht-jetzt-di…). Die Umsatzsteuererhöhung träfe den Binnenkonsum – den wir so dringend brauchen, um weniger von den Exporten abhängig zu sein. /6

@GitaGopinath In democracies, parliament is "responsible" for the budget—and thus the deficits. The more interesting question is whether and how the reserve currency status changes the trade-offs behind the parliament's choices. Would love to read your view!

The view that the dollar’s reserve currency status is responsible for its deficits is a terribly flawed view.

@VeniVidi_Victor Die Kritik an der Geldpolitik war dabei aber nicht "ordnungspolitisch" begründet. Wenn der SVR bei der Geld- und Fiskalpolitik einen bias hatte, dann einen neoklassisch-hawkischen - er gab Risiken für Abweichungen vom Produktionspotenzial nach oben relativ gesehen mehr Raum.

@FlorianMKern Nicht zu vergessen die wiederholten Warnungen vor Inflation und Mahnungen zu strafferer Geldpolitik seit 2014 (!)

Ob man jetzt jede "ordnungspolitisch" motivierte Aussage des SVR aus der Vergangenheit heute 1 zu 1 wiederholen würde, scheint mir auch durchaus fraglich (siehe z.B. Ausschnitt aus dem Jahresgutachten 2016/2017). (1/5) sachverstaendigenrat-wirtschaft.de/fileadmin/date…

@GeorgeSelgin @Brad_Setser Don't you think that the Korean Won's example of 2008 would fit? bis.org/publ/bppdf/bis…

@Brad_Setser But how many of these interpretations allow for the possibility of a balance of payments “crisis” under a floating rate regime?

This isn’t a matter of interpreting section 122: it’s a matter of understanding what a “balance of payments deficit” means. And it isn’t just the WSJ that says it means something that can’t occur in a floating rate regime. 1/2

PS: Wer sich für Wirtschaftshistorie interessiert und erfahren möchte, wie es dazu kam, dass wir Industriepolitik hierzulande manchmal nicht verstehen bzw. nur als Foulspiel wahrnehmen, kann hier mehr erfahren (der Titel ist mMn etwas irreführend) (5/5) podcasts.apple.com/us/podcast/jam…

Ebenfalls hat es dem SVR mbMn nicht geschadet, ein Mitglied zu haben, dass in Berkeley lehrt und in den USA lebt und das schon deshalb mit etwas Abstand auf die spezifisch deutsche wirtschaftspolitische Debatte blickt, die nicht immer frei von normativen biases geführt wird (4/5)

To give an example, suppose new $ is created to purchase goods from Scrooge McDuck (an individual who plans to hoard $ forever). The redistribution occurs from Scrooge to the rest of society, not the other way around. You're welcome. 😇

The key shortfall is a sustained weakness in domestic demand. Since 1999 real private consumption in Germany has grown by less than 1% per year. Domestic investment remained subdued as well. This is mirrored in the sharp rise in Germany’s current account surplus. 15/20